How to compute for opportunity cost?

[deepak]

I’m trying to understand how to compute opportunity cost in a simple and practical way. I know it’s about the value of the next best alternative that you give up, but I’m confused about how to calculate it properly.

 

[MitchelThe]

To compute opportunity cost, first identify potential alternatives to your chosen option. Assign a monetary value to each alternative and subtract it from the value of your chosen option. This will provide you with the opportunity cost. For example, if you choose to spend $100 on A instead of B, and B is worth $120, your opportunity cost is $20.

 

[Oscar]

Opportunity cost is calculated by subtracting the return of the chosen option from the return of the best alternative.
Formula: Opportunity Cost = Return of Best Alternative − Return of Chosen Option.
It measures what you give up when choosing one option over another.

 

[Blaise]

Opportunity cost = value of the next best alternative you give up.


Formula:
Opportunity Cost = Return of Best Alternative − Return of Chosen Option


Example: If Job A pays $50k and Job B pays $60k, choosing A means a $10k opportunity cost.